By Daniel Hunter
The key role the workplace will play in closing Britain’s chronic savings gap is highlighted by the publication of the Association of British Insurers' (ABI’s) pension report Time to Act: Tackling our Savings Problem and Building our Future.
The report comes as ABI research shows that many people are increasingly resigned to working longer or downsizing to a smaller property to help ensure an adequate retirement income.
The report highlights:
· The dramatic impact of saving a little bit more, a little earlier. Increasing an annual pension contribution from 8 to 12% can increase a pension pot by 50%, while delaying starting pension saving by five years can reduce a final pension pot by 17%.
· Over two thirds of people recognise that the level of their contributions has the biggest impact on the size of their pension.
· More needs to be done to utilise the workplace to encourage greater saving. Building on the introduction later this year of auto-enrolment, whether the introduction of other options, like the ‘save more tomorrow’ scheme in the USA (under which employees commit to future increases in pension contributions) could work in the UK.
“Auto-enrolment should be a watershed moment in tackling Britain’s savings gap," Steve Gay, the ABI’s Director of Life, Savings and Pensions, said.
"One in two people are not saving enough for their retirement, and many are not saving at all. Too many people are caught between a rock and a hard place: rising life expectancy makes the need to save for the future more important than ever; yet the tough economic times are understandably putting the squeeze on family budgets.
“Auto-enrolment will bring at least 7 million people into the savings habit. As we know that people are more likely to save through their payslip, we must look at how more can be done in the workplace to help people adequately save for their retirement”.
The need to kick-start pension savings is further highlighted by the results of the ABI’s latest consumer research. This shows that among the 2,177 non-retired adults surveyed:
- One in four people would be prepared to work beyond their planned retirement date to help ensure sufficient retirement income
- One in five would be willing to downsize to a smaller property to release money to pay for their retirement.
- Over half of people (53%) are not confident that they will have sufficient income in retirement to maintain their standard of living in retirement.
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